Having not seen anything on this topic, I did my maths and so far here is what I come up with. This is valid only for a guardian fighter, as of now I didn’t try this on any other class, so if someone could verify these number on their char sheet, I would be glad. Also, GFs are welcome also to check these numbers.

Hence, the damage reduction you get from Defense seem to be capped at 50%, overall damage reduction however also uses your AC, so it could in theory be above that (need better gear to be able to verify that),

For deflection, it is not yet clear to me if the deflected damage (already reduced by 50%) still goes through the damage reduction of AC and Defense. My guess is yes for two reasons:

1) If not, then you could in theory (provided the availability of gear of course) have a damage reduction of strictly more than 50% while if deflected it being reduced to 50%…which would make no sense, since having deflection would increase in this case the damage you take :-).

2) The combat log. I went into a zone, agroed one mob and logged the physical damage it did. while the combat log doesn’t state at all if that damage was deflected or not, the floating combat text clearly shows crits (the lightning arrow), normal hits and deflections. In this case the combat log show the actual magnitude of the hit and the damage you take. Here is a quick snippet (please don’t laugh, I wasn’t going to risk this on an epic boss, just some random mob).

My overall Damage reduction is currently at (as shown in char sheet) 46.1% this number seem to be incorrect in connection to the actual log since my character seem to consistently shrug more than half the damage. My defense is at 4049, my AC from gear is +20, and I have the shield defense paragon feat (+5) [which seem to be bugged since it display only +1] and the base AC is at (+10), so if my equation is correct :

I am not claiming this is how Armor specialization works, but the numbers do fit quite nicely. Of course I could respecc and try this out again (but those AD are hard to come by and the cost of a respecc is just out of budget for me right now, If anyone didn’t spec into these points, I would gladly want a chat and experiment with them to verify this).

All in all, one can conclude that :

1- Deflection stacks on top of defense
2- Any hit can be deflected (i.e. normal hits and critical hits), which suggests that the combat model is not a combat table, but a double roll. Basically, the mob rolls its damage (hit, crit), you roll your (hit, deflect).

The combination of defense and deflection could lead to very interesting optimizations. I am still working on the deflection rating vs. deflection chance (didn’t have much gear with deflection so any input numbers are welcome). One thing is certain, that deflection becomes quite useful per point past a certain point in defense, hence, using deflection runes (which have the same budget per point as defense) could be overall more beneficial in overall damage reduction.

I hope this little analysis could be helpful to others, looking forward to feedback and help on these topics. I may have made some mistakes, in that case I apologize for any misdirection this may cause. I also hope the devs answer my ticket and tweets on the +AC paragon feat if it is a bug or just a display bug in the character sheet (so far I really think it is a bug if my previous analysis turn out correctly).